Traka Share Price Moves 300% on Galaxy Resources Deal (ASX:TKL)

Traka Share Price Moves 300% on Galaxy Resources Deal (ASX:TKL)

The share price of small-cap mineral explorer Traka Resources Ltd [ASX:TKL] has soared in the opening hour of trade on the news of a new deal for Galaxy Resources Ltd [ASX:GXY].

GXY’s share price has also responded positively, with the company announcing sound results for the June quarter.

Traka’s share price action has been virtually non-existent this year.

Shares have been kept below the one-cent mark with very little activity to note.

Thanks to its new deal, TKL shares are up 300% or three cents at time of writing to trade at four cents per share.

Traka takes the gold

TKL originally entered a joint venture with GXY with a 20% interest free carried to production in any lithium and tantalum resource.

Meaning TKL did not have to contribute until the mine was set for operations.

Today’s announcement relates to the renegotiation of that agreement.

TKL will exchange its free carried interest at the Mt Cattlin tenements for 100% of the gold and other mineral potential in the area.

Galaxy will get 100% of the lithium and other pegmatite minerals.

Which is the focus of exploration at Mt Cattlin currently.

Though the share price seems excited by the new deal, is it a good one?

The area has had a history of gold mining and exploration.

But has laid inactive for decades according to TKL.

Traka acquired the tenements and recommenced exploration for gold in 2004.

TKL suspected there was opportunity at Mt Cattlin from exploration conducted in the 1980s and 1990s.

But a but a gold price in the low US$400s at the time hindered the economic feasibility of the project.

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The area was also mind in the early 20th century with reported production of 23,006 tonnes at 24.56 grams of gold per tonne (g/t).

An interesting deal for Galaxy

With TKL’s free carried interest now dissolved, GXY maintains 100% of the revenue earned from operations at Mt Cattlin.

As at 31 December 2019, the lithium and other pegmatite resource at Mt Cattlin were depleted by 2.1Mt.

No additional resource definition drilling occurred that year either.

GXY might be hoping that by giving TKL the rights to any other mineral produced at Mt Cattlin, their exploration efforts will fill out the known or estimated lithium resources.

Dissolving TKL’s free carried interest could also help firm up revenue as lithium prices continue to sink.

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Kind regards,

Lachlann Tierney,

For The Daily Reckoning Australia